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Part IX Costs, Funding, and Ideas for Optimization, 25 The Harmonization of Costs Practices in International Arbitration: The Search for the Holy Grail, B Some Preliminary Observations as to Costs

Michael O’Reilly

From: Defining Issues in International Arbitration: Celebrating 100 Years of the Chartered Institute of Arbitrators

Edited By: Julio César Betancourt

From: Oxford Legal Research Library (http://olrl.ouplaw.com). (c) Oxford University Press, 2021. All Rights Reserved. Subscriber: null; date: 19 January 2021

B.  Some Preliminary Observations as to Costs

25.09  The award as to costs ‘completes the mission of the arbitral tribunal [and] renders the arbitral tribunal functus officio’.7 While the tribunal will generally have the power to correct slips, the making of an award as to costs is usually its final action in the proceedings. The award as to costs may be included in the substantive award or, where the provisions applicable to the conduct of the proceedings permit, may be in a separate subsequent award.

25.10  Authors and rules (and hence the tribunals which apply those rules) draw a distinction between two classes of costs:

  1. (1)  central costs: those costs which relate to the central administration of the proceedings. They include the fees and expenses of the tribunal and those of any appointing authority (p. 273) or relevant arbitral institution. They include the costs of any services properly commissioned directly by the tribunal or arbitral institution, such as tribunal-appointed experts; and

  2. (2)  party costs: those expenses incurred directly by the parties. They include each party’s expenditure on investigations, witnesses, representation in the proceedings, and so on.

25.11  The utility of this classification is widely recognized, but a range of expressions is used to distinguish between them. A sample of these include: ‘The costs of international arbitration are two-fold and consist of the costs of the proceeding and the costs of the parties.’8 ‘The term “costs” in the context of arbitration may be divided into two broad categories: the costs of the arbitration and the costs of the parties.’9 ‘Costs related to arbitration can be divided into two main groups: arbitration costs and legal costs.’10

25.12  The main terminological confusion relates to what is described above as ‘central costs’. Expressions such as ‘costs of the arbitration’ or ‘arbitration costs’ bear a range of meanings in international arbitration rules and legislation—including, confusingly, the legal costs of the parties11 from which they are to be distinguished. For this reason, it is suggested that it may be appropriate to introduce a new term, hence ‘central costs’ which is not used in any other sense.

25.13  A number of features of costs in international arbitration are worthy of preliminary note. First, the applicable law of costs is generally part of the procedural law of the seat of the arbitration. Second, the remedy of costs is an incidental or derivative remedy. Third, the award of costs is generally discretionary. But, fourth, in line with the principle of party autonomy, an agreement by the parties as to costs will generally be acceptable by virtually all seats and applied by the parties. These points, while correct in their generality, have a number of exceptions, or potential exceptions.12

25.14  The third and fourth points lead to the following scheme: the costs will be in the discretion of the tribunal—but if the parties have agreed on the principles by which that discretion is to be exercised, tribunals will generally give effect to those principles.

Footnotes:

7  Blackaby (n 4) para 9.18. For further discussion, see Greg Fullelove, ‘Functus Officio?’ in Julio César Betancourt (ed), Defining Issues in International Arbitration: Celebrating 100 Years of the Chartered Institute of Arbitrators (OUP 2016) ch 24.

8  John Y Gotanda, ‘Attorneys’ Fees Agonistes: The Implications of Inconsistency in the Awarding of Fees and Costs in International Arbitrations’ in Miguel Ángel Fernández-Ballesteros and David Arias (eds), Liber Amicorum Bernardo Cremades (La Ley 2010).

9  Blackaby (n 4) 545, para 9.87.

10  Julian D M Lew, Loukas A Mistelis, and Stefan Kröll, Comparative International Commercial Arbitration (Kluwer Law International 2003) 652, para 24-80.

11  2012 ICC Rules, Art 37(1): ‘The costs of the arbitration shall include … the reasonable legal and other costs incurred by the parties for the arbitration’. 2010 UNCITRAL Rules, Art 40(1): ‘The arbitral tribunal shall fix the costs of arbitration … (2) The term ‘costs’ includes only … (e) The legal and other costs incurred by the parties …’. English Arbitration Act 1996: ‘(1) References in this Part to the costs of the arbitration are to … (c) the legal or other costs of the parties …’.

12  For fuller discussion, see Ong and O’Reilly (n 2).